Fidelity Clean Energy ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Equity Miscellaneous category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Fidelity Clean Energy ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Fidelity Clean Energy ETF has an asset-weighted Carbon Risk Score of 6.2, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. Fidelity Clean Energy Etf shows 92.2% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 37.7% average involvement of its peers in the Miscellaneous Sector category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund has no exposure to high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.
Currently, the fund has 25.5% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Miscellaneous Sector category has 16.8% exposure to fossil fuel-related businesses. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.